European Stockmarkets doing well so far today. France up 3%, Germany up 2.4% and the FTSE100 up 2.3%. This followed Hong Kong being up 5% overnight.
Eyes all turned to the US. If they follow suit then it will be a good end to the week and a good week overall with the FTSE100 up almost 5%.
crisis....what crisis.
Bear market rally.
Wise up and join the "rate-catchers" (as they call themselves on the MSE forums discussing cash accounts
Longer term I still believe the stock market will give greater returns especially if you contribute on a. monthly basis, the increase in interest rates is great (for savers) but many (like my father in law) had no idea they'd be taxed on anything over £1k (or £500) assuming outside an ISA.
European Stockmarkets doing well so far today. France up 3%, Germany up 2.4% and the FTSE100 up 2.3%. This followed Hong Kong being up 5% overnight.
Eyes all turned to the US. If they follow suit then it will be a good end to the week and a good week overall with the FTSE100 up almost 5%.
crisis....what crisis.
Bear market rally.
Wise up and join the "rate-catchers" (as they call themselves on the MSE forums discussing cash accounts
Longer term I still believe the stock market will give greater returns especially if you contribute on a. monthly basis, the increase in interest rates is great (for savers) but many (like my father in law) had no idea they'd be taxed on anything over £1k (or £500) assuming outside an ISA.
Sure, I agree, but I'm now convinced that for 6-12 months I'll be better off keeping cash in those rapidly increasing interest bearing accounts, rather than feeding in monthly, which was the plan, and what I was doing up until around August. I'm a fair bit older than you, and since I no longer get rental income, and don't get taxed on dividends as a non-resident, I have a decent allowance to work with for cash deposits. I might have a different view if I were 15 years younger (and UK resident). But I don't like the look of the global economic situation at all. Too many risks at the same time.
Apologies if this has been mentioned recently but annuity rates are getting a bit more interesting. Taking 25% tax free and sticking out for two to three years at just sub 5% seems like a sensible move? Might not be for everyone but getting more attractive than it has been for years.
I’m 65 an will hit state pension next year in September. As I spent most of my working life in a DB pension scheme and was contracted out. So despite having 44 full contribution years, I’m some way off full state pension. Looking online at UK GOV if I contribute no more in NI I will receive £153 per week. However, if I pay up for the 5 years between my last contribution and retirement, this will increase to £179.
So £26 a week more or 52x£26 = £1352 per annum.
It appears I only have to pay about £4200 to get this extra. So £1352 x4 = £5408. Paying 20% I get my money back in 4 years.
So after that I’m On £1352 (plus increases) each year until I die.
Has anybody any experience of this ? Does what I saying sound correct, or is there a flaw in my workings.
I’m 65 an will hit state pension next year in September. As I spent most of my working life in a DB pension scheme and was contracted out. So despite having 44 full contribution years, I’m some way off full state pension. Looking online at UK GOV if I contribute no more in NI I will receive £153 per week. However, if I pay up for the 5 years between my last contribution and retirement, this will increase to £179.
So £26 a week more or 52x£26 = £1352 per annum.
It appears I only have to pay about £4200 to get this extra. So £1352 x4 = £5408. Paying 20% I get my money back in 4 years.
So after that I’m On £1352 (plus increases) each year until I die.
Has anybody any experience of this ? Does what I saying sound correct, or is there a flaw in my workings.
Your workings sound about right. A mate of mine paid in about 6k to put his wife on a full state pension. That was around 7 years ago. The longer you live the more you will benefit.
I’m 65 an will hit state pension next year in September. As I spent most of my working life in a DB pension scheme and was contracted out. So despite having 44 full contribution years, I’m some way off full state pension. Looking online at UK GOV if I contribute no more in NI I will receive £153 per week. However, if I pay up for the 5 years between my last contribution and retirement, this will increase to £179.
So £26 a week more or 52x£26 = £1352 per annum.
It appears I only have to pay about £4200 to get this extra. So £1352 x4 = £5408. Paying 20% I get my money back in 4 years.
So after that I’m On £1352 (plus increases) each year until I die.
Has anybody any experience of this ? Does what I saying sound correct, or is there a flaw in my workings.
My mum did this as she was a few years short, cost her about £3k and payback was in about 5 years. Sadly she died a year after starting drawing - but it was still the right thing to do.
I’m 65 an will hit state pension next year in September. As I spent most of my working life in a DB pension scheme and was contracted out. So despite having 44 full contribution years, I’m some way off full state pension. Looking online at UK GOV if I contribute no more in NI I will receive £153 per week. However, if I pay up for the 5 years between my last contribution and retirement, this will increase to £179.
So £26 a week more or 52x£26 = £1352 per annum.
It appears I only have to pay about £4200 to get this extra. So £1352 x4 = £5408. Paying 20% I get my money back in 4 years.
So after that I’m On £1352 (plus increases) each year until I die.
Has anybody any experience of this ? Does what I saying sound correct, or is there a flaw in my workings.
I'm going through this right now. I was overseas for 18 years. Perhaps it's because I'm dealing with the overseas department but I'd advise doing this asap. I wrote to them four months ago and I'm still waiting for my figures.
Echo above comments re paying in to get extra state pension. We did this for my wife last year and she is now reaping the benefit. Only argument for not doing is if you are in very bad health imo. However be prepared to get a bit frustrated with ringing HMRC to get this done due to their idiotic bureacracy.
Re my beef with Vanguard Life Strategy 20% fund it seems the FT at least agrees with me..."No FT, no comment" as the ads used to say...
Vanguard’s low-risk UK strategies upended
The rare tandem fall in bonds and stocks this year has claimed another victim. Vanguard’s £34bn UK Lifestrategy funds range has performed exactly the opposite of the way many retail buyers would expect, writes Joshua Oliver.
Its 80/20 bonds to equity fund, supposedly the safer end of the range, has lost 16 per cent in the first 10 months of the year. At the risky end of the spectrum, a fund with 80 per cent in equities is only down 9 per cent, according to Morningstar data.
This is a problem for Vanguard and other providers of funds that are “balanced” between bonds and equities since vehicles with more bonds are marketed to retail investors as being safer and less prone to losses in a downturn.
The fact that bond-heavy funds have lost more in this sell-off is contrary to industry conventional wisdom and may make for some awkward conversations with clients.
Vanguard’s troubles stand out in part because of its market share in the UK retail market. LifeStrategy held three of the top five spots on the most-bought list at DIY platform Interactive Investor in the year to September.
And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil.
Vanguard says it has a “huge amount of sympathy” for investors facing losses, but is not going to change it the way it invests. It thinks correlation between bonds and equities will drop.
“When times are tough, human nature sets in. It feels like something is broken but it’s not,” said James Norton, head of financial planners at Vanguard UK. “Exceptions do happen, and this year is essentially one of those exceptions.”
So there it is. I've been done by Kamikwasi's moron tax.
Re my beef with Vanguard Life Strategy 20% fund it seems the FT at least agrees with me..."No FT, no comment" as the ads used to say...
Vanguard’s low-risk UK strategies upended
The rare tandem fall in bonds and stocks this year has claimed another victim. Vanguard’s £34bn UK Lifestrategy funds range has performed exactly the opposite of the way many retail buyers would expect, writes Joshua Oliver.
Its 80/20 bonds to equity fund, supposedly the safer end of the range, has lost 16 per cent in the first 10 months of the year. At the risky end of the spectrum, a fund with 80 per cent in equities is only down 9 per cent, according to Morningstar data.
This is a problem for Vanguard and other providers of funds that are “balanced” between bonds and equities since vehicles with more bonds are marketed to retail investors as being safer and less prone to losses in a downturn.
The fact that bond-heavy funds have lost more in this sell-off is contrary to industry conventional wisdom and may make for some awkward conversations with clients.
Vanguard’s troubles stand out in part because of its market share in the UK retail market. LifeStrategy held three of the top five spots on the most-bought list at DIY platform Interactive Investor in the year to September.
And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil.
Vanguard says it has a “huge amount of sympathy” for investors facing losses, but is not going to change it the way it invests. It thinks correlation between bonds and equities will drop.
“When times are tough, human nature sets in. It feels like something is broken but it’s not,” said James Norton, head of financial planners at Vanguard UK. “Exceptions do happen, and this year is essentially one of those exceptions.”
So there it is. I've been done by Kamikwasi's moron tax.
And this is why punters should take advice & not just go for the low cost option (I know you haven't done that @PragueAddick 😉). An adviser can be actively moving monies around & not just leaving money sitting in Bond funds that are losing money.
Vanguard seems to suggest that it will all come right for the bonds and gilts they have in that fund. Do they have good grounds for that, or is it a case of "well they would say that..."
Vanguard seems to suggest that it will all come right for the bonds and gilts they have in that fund. Do they have good grounds for that, or is it a case of "well they would say that..."
Listening to a few fund management companies the consensus is that Bonds are about to make a recovery.....but again, as you say, they would say that wouldn't they 🙂.
Slow re-action on last weeks 0.75% rate rise. First out traps I can see is Kent Reliance who have passed on the whole 0.75% raising their current easy access from 2% to 2.75%.
Re my beef with Vanguard Life Strategy 20% fund it seems the FT at least agrees with me..."No FT, no comment" as the ads used to say...
Vanguard’s low-risk UK strategies upended
The rare tandem fall in bonds and stocks this year has claimed another victim. Vanguard’s £34bn UK Lifestrategy funds range has performed exactly the opposite of the way many retail buyers would expect, writes Joshua Oliver.
Its 80/20 bonds to equity fund, supposedly the safer end of the range, has lost 16 per cent in the first 10 months of the year. At the risky end of the spectrum, a fund with 80 per cent in equities is only down 9 per cent, according to Morningstar data.
This is a problem for Vanguard and other providers of funds that are “balanced” between bonds and equities since vehicles with more bonds are marketed to retail investors as being safer and less prone to losses in a downturn.
The fact that bond-heavy funds have lost more in this sell-off is contrary to industry conventional wisdom and may make for some awkward conversations with clients.
Vanguard’s troubles stand out in part because of its market share in the UK retail market. LifeStrategy held three of the top five spots on the most-bought list at DIY platform Interactive Investor in the year to September.
And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil.
Vanguard says it has a “huge amount of sympathy” for investors facing losses, but is not going to change it the way it invests. It thinks correlation between bonds and equities will drop.
“When times are tough, human nature sets in. It feels like something is broken but it’s not,” said James Norton, head of financial planners at Vanguard UK. “Exceptions do happen, and this year is essentially one of those exceptions.”
So there it is. I've been done by Kamikwasi's moron tax.
Sorry, Prague, I've let it go a few times now but have to call this out ;-)
It was bugger all to do with a 2bn pound tax cut and not just because it wasn't likely to cost anything in reality and wasn't going to be introduced until April, way after any OBR reviews spending plan.
14 years of cheap money, an extra GBP 1,500 billion of borrowing in 'unfunded' budgets since 2008 (to use the current vernacular, what used to be called borrowing), ignoring flu pandemic strategies and shutting down the world's economy for two years, plus years of listening to Putin-funded Climate Marxists is what has caused this; 'this' being inflation. Now inflation is out of control, no-one is going to lend any government money if they as much as try to grow the economy by the usual means, unless they happen to be lucky enough to own the reserve currency. Note that Biden is pumping another USD 3 trillion of -'unfunded' - handouts into their economy.
The BoE announcing QT the day before the last budget and the governor scaring the markets shitless that evening with his portents of doom .... then quietly dropping said QT a week later, once the damage was done and the objective secured, is where the smoking gun resides. Retaliation for sacking Tom Scholar, I was reliably and gleefully (to use a BBC term) informed by a couple of people on the inside. They actually risked blowing up the economy and nearly brought their own pension fund down, in order to 'get rid of the extremists', so they claimed to me.
As for the bond traders I know, they didn't give a flying f*ck about the tax cuts, although there were plenty that were happy to get on the bandwagon, once the crisis had been triggered and there was easy money to be made. Then they bought heavily on the dip and locked in very safe, secure returns for the next couple of years.
Still think it was all down to the two jokers scheming in the Richard I? Note that the US bond market has had its worse year since records began. i.e. worse than 2008, worse than 73/74, worse than Vietnam and the two world wars, worse than the 30s. 2022 has it's very own column in terms for how many standard deviations it is away from median returns. No 45p tax rate or Brexit there. This reckoning has been coming for a long time, I would say since 2001. And there is an extremely long list of culprits that sank us into heavy debt that are delighted that so many people have bought the Kamikwasi explanation.
I hear you, especially re Bailey, about whom I expressed my doubts on here at the time. And to some extent I was just venting my exasperation at a 15% capital loss on Kwarteng (whom I nevertheless still believe should never have been near the job). But I don't think you have really addressed this specific FT line:
"And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil."
So to be a bit more precise, I'm saying that without Kwarteng my losses on this fund would be perhaps 10% rather than 15%. Why am I wrong to assert that?
I hear you, especially re Bailey, about whom I expressed my doubts on here at the time. And to some extent I was just venting my exasperation at a 15% capital loss on Kwarteng (whom I nevertheless still believe should never have been near the job). But I don't think you have really addressed this specific FT line:
"And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil."
I have no clue about this but it wouldn't surprise me if the UK bias is because they are marketing these funds in the UK to UK investors. They are a US Company.....do you think they have a UK bias in their US funds?
I get invited onto the Vanguard quarterly fund updates. I dont generally join up to listen/watch them but I may do in the future to see what they are saying about their exposure to UK Bonds. As I've said before, I dont use them for my clients money so don't really know their view on their Bond positions, but being overweight in UK Bonds / Gilts this year has not been good for any fund management company. Since the start of the year I've tried moving clients out of Bonds and into Absolute Return funds. Problem is this year has seen almost everything decline, Equities, Bonds, Property, Commodities. I saw a chart last week (up to the end of September) and only one sector (Oli & Gas) was in positive territory. You just have had to be the least worst asset(s).
I hear you, especially re Bailey, about whom I expressed my doubts on here at the time. And to some extent I was just venting my exasperation at a 15% capital loss on Kwarteng (whom I nevertheless still believe should never have been near the job). But I don't think you have really addressed this specific FT line:
"And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil."
I have no clue about this but it wouldn't surprise me if the UK bias is because they are marketing these funds in the UK to UK investors. They are a US Company.....do you think they have a UK bias in their US funds?
I get invited onto the Vanguard quarterly fund updates. I dont generally join up to listen/watch them but I may do in the future to see what they are saying about their exposure to UK Bonds. As I've said before, I dont use them for my clients money so don't really know their view on their Bond positions, but being overweight in UK Bonds / Gilts this year has not been good for any fund management company. Since the start of the year I've tried moving clients out of Bonds and into Absolute Return funds. Problem is this year has seen almost everything decline, Equities, Bonds, Property, Commodities. I saw a chart last week (up to the end of September) and only one sector (Oli & Gas) was in positive territory. You just have had to be the least worst asset(s).
@ Prague, if you were going to put a positive spin on it, you'd say you have to take the long-term view. But personally, I've had issues with the official line - and one that IFAs have to take from a regulatory perspective - that as people reach 50 there needs to be an in reading skew towards bonds. I think that's nonsense when nowadays some people can be retired for as long as they're working.
As for the skew - that would make sense, having exposure to your local market and currency, as long as it's transparent and you are aware of your exposure. Sounds like not the case in this example and doesn't work for you as it's not your local market!
If I were going to invest in bonds at all (and I may well in the depth of this crisis when everything is bombed out), then I might be as inclined to go for high quality corporate issuers like BAT as much as govies! They might be seen as safer bets than governments by the middle of next year.
I was going to take @TelMc32's Vanguard fund and compare it, graphically, with Life Strategy 20% but I could not finda platform that has both, (least of all Vanguard UK's own site which is very low rent). I'm not sure whether anyway it's the closest Vanguard fund to LS which would strip out the "British factor", - which I suppose is objectively what we want to do (well i do, anyway, for decision-making purposes)
Trustnet shows Life Strategy 20% is down 16.2% on YTD.
Trustnet only lists the Hedged version of Tel's fund, but that too is down 15.4%
On the other hand, for example the Vanguard US Treasury bond fund is actually up 1.4% while its US corporate bond fund is down 4.3%.
So I don't know whether I can isolate the British specific element in the UK Life Strategy fund's fall, from the above, even though the FT obviously believes it exists, irrespective of whether it was caused by Kwarteng, Bailey, or Jayden Stockley. The question is, what to do about it, which I will post separately below, as I will certainly appreciate the thoughts of those who understand this part of the market better than I do...
To be fair to Vanguard, I also have their US Equity Index fund, they are both positive unlike pretty much anything from any fund (whether bonds or equities) elsewhere (predominantly UK) over the last 12 months. One property (abrdn Global Real Estate) and one UK (Schroeder Recovery) being the other positive exceptions.
So Vanguard's position is, hold, on the basis that the year long phenomenon of Equities and bonds moving in lock-step and thus defying years of convention, will end. Worryingly however they do not explain why they think it will end and give any guidance about the time frame for this. Further, if it ends soon, and equities move up on the back of lower inflation/end of war etc, this implies that the bond sector would move down, thus increasing the losses in Life Strategy, which is 80% weighted in bonds. Correct (in principle) ?
So there is a safe alternative in cash deposits. Unfortunately I have a chunk of this fund in my SIPP, so there the best I can do is in a money market fund, which in the next 12 months might do maybe 1.5-2.0%. However the other holding is in the Vanguard platform and could be pulled out and put in a 1 year fixed account yielding maybe 4.5%.
So the question is, in the next 12 months will the Life Strategy 20 pick up more than 4.5% ? If so, then I should hold. The charts covering the period of recent turmoil send mixed messages. The red line is the LS20, and the grey one, LS100. The three-month period covering the chaotic week of Kwarteng and the aftermath is not encouraging however in the most recent 4 weeks the performances inverted and LS20 was the best performer, and LS 100 the worst. What has caused this uplift...gilt market stabilising?
I have some Vanguard LS 100% equity. Yesterday despite Monday's good rise in the US they managed to fall 0.43%, as coincidentally did all their LS funds. I wonder if they'll repeat that feat again today...
(I appreciate that it's an international fund, but everything else was pretty flat)
I'm inclining more to picking up some highish (5%+) yielding big co shares while prices are lowish - theyre for the longer term so short term movements dont trouble me as long as the dividends hold up.
So Vanguard's position is, hold, on the basis that the year long phenomenon of Equities and bonds moving in lock-step and thus defying years of convention, will end. Worryingly however they do not explain why they think it will end and give any guidance about the time frame for this. Further, if it ends soon, and equities move up on the back of lower inflation/end of war etc, this implies that the bond sector would move down, thus increasing the losses in Life Strategy, which is 80% weighted in bonds. Correct (in principle) ?
So there is a safe alternative in cash deposits. Unfortunately I have a chunk of this fund in my SIPP, so there the best I can do is in a money market fund, which in the next 12 months might do maybe 1.5-2.0%. However the other holding is in the Vanguard platform and could be pulled out and put in a 1 year fixed account yielding maybe 4.5%.
So the question is, in the next 12 months will the Life Strategy 20 pick up more than 4.5% ? If so, then I should hold. The charts covering the period of recent turmoil send mixed messages. The red line is the LS20, and the grey one, LS100. The three-month period covering the chaotic week of Kwarteng and the aftermath is not encouraging however in the most recent 4 weeks the performances inverted and LS20 was the best performer, and LS 100 the worst. What has caused this uplift...gilt market stabilising?
The short answer is 'yes'. The interest rate curve has flattened, i.e. expecting lower terminal rates, hence why mortgage rates are coming down and bonds are rising again.
But inflation is the killer of bonds, so if inflation comes down, rates should follow further and bonds will rise. If the geopolitical situation improves, ditto.
I wouldn't get too concerned about equity-bond correlations, as that's more complicated and can change depending on the circumstances. It's not that unusual for equites and bonds to move in the same direction. In fact, it always happens when bond markets crash, it's just that we haven't had a big bond market sell off for a very long time (2015 was the nearest and there are parallels to today). I'm pretty sure it usually happens coming out of a recession, as all ships rise. A stable market may switch between bonds and equities to reflect relative risk reward trade-offs. But after a recession, there is cash on the side, whilst at the top of the market, it's the opposite problem, most of the cash is on the table and people panic sell, particularly those on margin who have to raise liquidity.
Margin trading is doubly affected by rising interest rates. There are some interesting graphs showing large retail liquidations to cash and reducing leverage - that's all sucking liquidity out of this market.
The problem is if inflation keeps rising. Whilst governments who borrow in their own currency will never default (because they can always print more) as even lunatics like Paul Krugman, a strong advocate of MMT*, have had to admit, governments achieve this by inflation. The reason this has only just started to happen is because the Great China Deflation and (aggregate) benefits from globalisation are now over and in fact are now in reverse. 2015 was a warning and was seen as a dress rehearsal because that was the first time China took a wobble. Now it seems intent on continuing to do itself and us economic harm with its Covid lock down policy. If that reverses, markets will surge, but they doubled down at the weekend.
In the continued pain scenario, we have some way to go before the bottom in equities but some bonds traders I know are buying bonds on the basis that inflation should at least start to come down, even if company earnings start to fail. As long as you want to hold them to maturity, any dips in between won't hurt you but the income just may not match inflation.
FYI, I'm still part way through switching my accounts over to Interactive Brokers. They are offering 2.444 and 3.333% respectively on GBP and USD cash balances sitting in the SIPP. I'll dip in and out of this market for the next 6-12 months and earn some interest along the way.
* Modern Monetary Theory or Magic Money Tree, take your pick.
Right, so my brain is hurting a bit, but my takeout from your post is that if we get to a point where I believe inflation has peaked in many countries (and I think we may be quite near that point) then I might reasonably take the view that bonds will start to move up, even if we remain in an equity bear market. In which case I'd be better advised to stick with the Vanguard fund.
I'm having trouble believing that the recovery would be as swift as the fall (15% in 8 months...) but then it need not be that strong to beat 4.5% over 1 year.
Your remark re Interactive Brokers gave me an idea, Hargreaves Lansdowne have this thing called Active Savings which operates like Raisin, and is free for the customer. But guess what, it can only be opened within their normal Fund and Share Account, not within a SIPP...none of their offers are anything you can't get or beat elsewhere. And your deal is presumably effectively instant access. That's a very good benefit of the platform.
I have some Vanguard LS 100% equity. Yesterday despite Monday's good rise in the US they managed to fall 0.43%, as coincidentally did all their LS funds. I wonder if they'll repeat that feat again today...
(I appreciate that it's an international fund, but everything else was pretty flat)
I'm inclining more to picking up some highish (5%+) yielding big co shares while prices are lowish - theyre for the longer term so short term movements dont trouble me as long as the dividends hold up.
You may just find it's a pricing/timing issue (I know its something that annoys @PragueAddick). Vanguard might price their funds at 12 noon, and as they are forward pricing then the values used today (Tuesday) might be those calculated at noon yesterday (Monday)......when the US markets have not opened so probably using prices from close of business Friday. Even if they price at 5pm you will (at best) be getting prices a few hours after opening, and not the prices at close of business on the US on Monday.
Also, dont forget currency differences and if its hedged or not.
Right, so my brain is hurting a bit, but my takeout from your post is that if we get to a point where I believe inflation has peaked in many countries (and I think we may be quite near that point) then I might reasonably take the view that bonds will start to move up, even if we remain in an equity bear market. In which case I'd be better advised to stick with the Vanguard fund.
I'm having trouble believing that the recovery would be as swift as the fall (15% in 8 months...) but then it need not be that strong to beat 4.5% over 1 year.
Your remark re Interactive Brokers gave me an idea, Hargreaves Lansdowne have this thing called Active Savings which operates like Raisin, and is free for the customer. But guess what, it can only be opened within their normal Fund and Share Account, not within a SIPP...none of their offers are anything you can't get or beat elsewhere. And your deal is presumably effectively instant access. That's a very good benefit of the platform.
Sorry about the headache! Yes, I wouldn't sell, if you believe inflation is about to top (and I hope you're right).
Similarly, I bought infra and property (warehouse) ITs on the dip. I've taken a small loss but am just going to wait for them to recover and collect the 6% dividend in the interim. They price a bit like bonds, although the property ones have the risk of asset devaluations but both can increase prices and maintain dividends against inflation. They could go down with the equity market, but I have no intention of selling them and don't expect their dividend to need to reduce.
Have a look at this guy, who I know reasonably well, for more detail on bonds. https://www.crowknows.co.uk/investment-rules/ He's an ex-asset manager who retired in his forties, so was pretty successful, and knows the bond market inside out. He has some useful general tips on investing as well. I hadn't read him in a couple of months but am not surprised on his views on the market recently!
As for IB, yes, you get paid on any cash balances in your SIPP. So, as soon as you sell a stock, you're earning interest on that cash and that can be across multiple currencies. The transfer hasn't gone through yet, but the interest appears to be credited on a daily basis.
Their FX charges are way lower than HL as well - very close to inter-bank rates. Their dealing rates are virtually zero. You do have to pay for market data, but it's pretty low and you get level two data in real time, so way above anything you get from HL. You can put trades directly into the market, so shave a few points off the spread too. Stop and limit orders on US shares too. All this would have saved me thousands over the last few years. Last, for me, it gives me the opportunity to trade options, which is a much safer way of off-setting risks than how I'm currently having to do it, via leveraged ETFs (which I think suspect be banned!). The fx and interest alone would have given me 0.8% on my portfolio this year. With better stops and executing inside the best bid and offer, it should easily add 1%. A lot of this you can do with IG, where I have my ISAs, but their FX charges are higher.
I know nothing about any of this and don’t understand it. BUT have been asked to put money into something called AMMdefi. It invests your money into various crypto things. Lots of my friends are making a lot of money on it. Anyone heard of it or is it a dodgy ponzu type thing?
I know nothing about any of this and don’t understand it. BUT have been asked to put money into something called AMMdefi. It invests your money into various crypto things. Lots of my friends are making a lot of money on it. Anyone heard of it or is it a dodgy ponzu type thing?
Are your friends really making money? Have any of them actually been able to get money out?
Seems to be a scam and there are so many similar ones out there at the moment.
I know nothing about any of this and don’t understand it. BUT have been asked to put money into something called AMMdefi. It invests your money into various crypto things. Lots of my friends are making a lot of money on it. Anyone heard of it or is it a dodgy ponzu type thing?
One of the best bits of advice I was given is never invest in something you don't understand.
Comments
It appears I only have to pay about £4200 to get this extra. So £1352 x4 = £5408. Paying 20% I get my money back in 4 years.
A mate of mine paid in about 6k to put his wife on a full state pension.
That was around 7 years ago.
The longer you live the more you will benefit.
However be prepared to get a bit frustrated with ringing HMRC to get this done due to their idiotic bureacracy.
Vanguard’s low-risk UK strategies upended
The rare tandem fall in bonds and stocks this year has claimed another victim. Vanguard’s £34bn UK Lifestrategy funds range has performed exactly the opposite of the way many retail buyers would expect, writes Joshua Oliver.
Its 80/20 bonds to equity fund, supposedly the safer end of the range, has lost 16 per cent in the first 10 months of the year. At the risky end of the spectrum, a fund with 80 per cent in equities is only down 9 per cent, according to Morningstar data.
This is a problem for Vanguard and other providers of funds that are “balanced” between bonds and equities since vehicles with more bonds are marketed to retail investors as being safer and less prone to losses in a downturn.
The fact that bond-heavy funds have lost more in this sell-off is contrary to industry conventional wisdom and may make for some awkward conversations with clients.
Vanguard’s troubles stand out in part because of its market share in the UK retail market. LifeStrategy held three of the top five spots on the most-bought list at DIY platform Interactive Investor in the year to September.
And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil.
Vanguard says it has a “huge amount of sympathy” for investors facing losses, but is not going to change it the way it invests. It thinks correlation between bonds and equities will drop.
“When times are tough, human nature sets in. It feels like something is broken but it’s not,” said James Norton, head of financial planners at Vanguard UK. “Exceptions do happen, and this year is essentially one of those exceptions.”
So there it is. I've been done by Kamikwasi's moron tax.
It was bugger all to do with a 2bn pound tax cut and not just because it wasn't likely to cost anything in reality and wasn't going to be introduced until April, way after any OBR reviews spending plan.
14 years of cheap money, an extra GBP 1,500 billion of borrowing in 'unfunded' budgets since 2008 (to use the current vernacular, what used to be called borrowing), ignoring flu pandemic strategies and shutting down the world's economy for two years, plus years of listening to Putin-funded Climate Marxists is what has caused this; 'this' being inflation. Now inflation is out of control, no-one is going to lend any government money if they as much as try to grow the economy by the usual means, unless they happen to be lucky enough to own the reserve currency. Note that Biden is pumping another USD 3 trillion of -'unfunded' - handouts into their economy.
The BoE announcing QT the day before the last budget and the governor scaring the markets shitless that evening with his portents of doom .... then quietly dropping said QT a week later, once the damage was done and the objective secured, is where the smoking gun resides. Retaliation for sacking Tom Scholar, I was reliably and gleefully (to use a BBC term) informed by a couple of people on the inside. They actually risked blowing up the economy and nearly brought their own pension fund down, in order to 'get rid of the extremists', so they claimed to me.
As for the bond traders I know, they didn't give a flying f*ck about the tax cuts, although there were plenty that were happy to get on the bandwagon, once the crisis had been triggered and there was easy money to be made. Then they bought heavily on the dip and locked in very safe, secure returns for the next couple of years.
Still think it was all down to the two jokers scheming in the Richard I? Note that the US bond market has had its worse year since records began. i.e. worse than 2008, worse than 73/74, worse than Vietnam and the two world wars, worse than the 30s. 2022 has it's very own column in terms for how many standard deviations it is away from median returns. No 45p tax rate or Brexit there. This reckoning has been coming for a long time, I would say since 2001. And there is an extremely long list of culprits that sank us into heavy debt that are delighted that so many people have bought the Kamikwasi explanation.
I hear you, especially re Bailey, about whom I expressed my doubts on here at the time. And to some extent I was just venting my exasperation at a 15% capital loss on Kwarteng (whom I nevertheless still believe should never have been near the job). But I don't think you have really addressed this specific FT line:
"And its UK range is also especially interesting because Vanguard includes a “home-bias” in the funds, which otherwise take market exposure based simply on market cap. The 35 per cent tilt towards UK bonds has made matters worse as gilts have been hammered by political turmoil."
I get invited onto the Vanguard quarterly fund updates. I dont generally join up to listen/watch them but I may do in the future to see what they are saying about their exposure to UK Bonds. As I've said before, I dont use them for my clients money so don't really know their view on their Bond positions, but being overweight in UK Bonds / Gilts this year has not been good for any fund management company. Since the start of the year I've tried moving clients out of Bonds and into Absolute Return funds. Problem is this year has seen almost everything decline, Equities, Bonds, Property, Commodities. I saw a chart last week (up to the end of September) and only one sector (Oli & Gas) was in positive territory. You just have had to be the least worst asset(s).
As for the skew - that would make sense, having exposure to your local market and currency, as long as it's transparent and you are aware of your exposure. Sounds like not the case in this example and doesn't work for you as it's not your local market!
If I were going to invest in bonds at all (and I may well in the depth of this crisis when everything is bombed out), then I might be as inclined to go for high quality corporate issuers like BAT as much as govies! They might be seen as safer bets than governments by the middle of next year.
Trustnet shows Life Strategy 20% is down 16.2% on YTD.
Trustnet only lists the Hedged version of Tel's fund, but that too is down 15.4%
On the other hand, for example the Vanguard US Treasury bond fund is actually up 1.4% while its US corporate bond fund is down 4.3%.
So I don't know whether I can isolate the British specific element in the UK Life Strategy fund's fall, from the above, even though the FT obviously believes it exists, irrespective of whether it was caused by Kwarteng, Bailey, or Jayden Stockley. The question is, what to do about it, which I will post separately below, as I will certainly appreciate the thoughts of those who understand this part of the market better than I do...
So there is a safe alternative in cash deposits. Unfortunately I have a chunk of this fund in my SIPP, so there the best I can do is in a money market fund, which in the next 12 months might do maybe 1.5-2.0%. However the other holding is in the Vanguard platform and could be pulled out and put in a 1 year fixed account yielding maybe 4.5%.
So the question is, in the next 12 months will the Life Strategy 20 pick up more than 4.5% ? If so, then I should hold. The charts covering the period of recent turmoil send mixed messages. The red line is the LS20, and the grey one, LS100. The three-month period covering the chaotic week of Kwarteng and the aftermath is not encouraging
But inflation is the killer of bonds, so if inflation comes down, rates should follow further and bonds will rise. If the geopolitical situation improves, ditto.
I wouldn't get too concerned about equity-bond correlations, as that's more complicated and can change depending on the circumstances. It's not that unusual for equites and bonds to move in the same direction. In fact, it always happens when bond markets crash, it's just that we haven't had a big bond market sell off for a very long time (2015 was the nearest and there are parallels to today). I'm pretty sure it usually happens coming out of a recession, as all ships rise. A stable market may switch between bonds and equities to reflect relative risk reward trade-offs. But after a recession, there is cash on the side, whilst at the top of the market, it's the opposite problem, most of the cash is on the table and people panic sell, particularly those on margin who have to raise liquidity.
Margin trading is doubly affected by rising interest rates. There are some interesting graphs showing large retail liquidations to cash and reducing leverage - that's all sucking liquidity out of this market.
The problem is if inflation keeps rising. Whilst governments who borrow in their own currency will never default (because they can always print more) as even lunatics like Paul Krugman, a strong advocate of MMT*, have had to admit, governments achieve this by inflation. The reason this has only just started to happen is because the Great China Deflation and (aggregate) benefits from globalisation are now over and in fact are now in reverse. 2015 was a warning and was seen as a dress rehearsal because that was the first time China took a wobble. Now it seems intent on continuing to do itself and us economic harm with its Covid lock down policy. If that reverses, markets will surge, but they doubled down at the weekend.
In the continued pain scenario, we have some way to go before the bottom in equities but some bonds traders I know are buying bonds on the basis that inflation should at least start to come down, even if company earnings start to fail. As long as you want to hold them to maturity, any dips in between won't hurt you but the income just may not match inflation.
FYI, I'm still part way through switching my accounts over to Interactive Brokers. They are offering 2.444 and 3.333% respectively on GBP and USD cash balances sitting in the SIPP. I'll dip in and out of this market for the next 6-12 months and earn some interest along the way.
* Modern Monetary Theory or Magic Money Tree, take your pick.
Right, so my brain is hurting a bit, but my takeout from your post is that if we get to a point where I believe inflation has peaked in many countries (and I think we may be quite near that point) then I might reasonably take the view that bonds will start to move up, even if we remain in an equity bear market. In which case I'd be better advised to stick with the Vanguard fund.
I'm having trouble believing that the recovery would be as swift as the fall (15% in 8 months...) but then it need not be that strong to beat 4.5% over 1 year.
Your remark re Interactive Brokers gave me an idea, Hargreaves Lansdowne have this thing called Active Savings which operates like Raisin, and is free for the customer. But guess what, it can only be opened within their normal Fund and Share Account, not within a SIPP...none of their offers are anything you can't get or beat elsewhere. And your deal is presumably effectively instant access. That's a very good benefit of the platform.
Also, dont forget currency differences and if its hedged or not.
Similarly, I bought infra and property (warehouse) ITs on the dip. I've taken a small loss but am just going to wait for them to recover and collect the 6% dividend in the interim. They price a bit like bonds, although the property ones have the risk of asset devaluations but both can increase prices and maintain dividends against inflation. They could go down with the equity market, but I have no intention of selling them and don't expect their dividend to need to reduce.
Have a look at this guy, who I know reasonably well, for more detail on bonds. https://www.crowknows.co.uk/investment-rules/ He's an ex-asset manager who retired in his forties, so was pretty successful, and knows the bond market inside out. He has some useful general tips on investing as well. I hadn't read him in a couple of months but am not surprised on his views on the market recently!
As for IB, yes, you get paid on any cash balances in your SIPP. So, as soon as you sell a stock, you're earning interest on that cash and that can be across multiple currencies. The transfer hasn't gone through yet, but the interest appears to be credited on a daily basis.
Their FX charges are way lower than HL as well - very close to inter-bank rates. Their dealing rates are virtually zero. You do have to pay for market data, but it's pretty low and you get level two data in real time, so way above anything you get from HL. You can put trades directly into the market, so shave a few points off the spread too. Stop and limit orders on US shares too. All this would have saved me thousands over the last few years. Last, for me, it gives me the opportunity to trade options, which is a much safer way of off-setting risks than how I'm currently having to do it, via leveraged ETFs (which I think suspect be banned!). The fx and interest alone would have given me 0.8% on my portfolio this year. With better stops and executing inside the best bid and offer, it should easily add 1%. A lot of this you can do with IG, where I have my ISAs, but their FX charges are higher.
https://www.scamwatcher.com/scam/view/516369
It has stood me well over the years.